Car finance rates are not set in stone. Rather, there are factors that influence the interest rate that applicants are eligible for and the accompanying terms of their loan. When investigating car finance or securing a car loan, it is important to understand what these determining factors are. Being an informed car finance customer will help ensure that you get the best possible finance rates and are able to meet the repayment plan. Here's a rundown of the factors that influence your car finance rate:

Secured loan: A secured car loan means that the loan is specifically for the car, and as such the car acts as security or collateral should you fall behind on your payments. If this happens, the lender can essentially take the car away. Because of this security for the lender, interest rates are often lower than personal, unsecured loans. Those planning on purchasing a second hand vehicle with their loan should check whether their lender provides secured loans for used cars - not all do.

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Loan term: The loan term - the time period over which the loan is to be repaid - can influence the annual interest rate. Usually the longer the loan term, the lower the interest rate. However it is important not to extend your loan term just to achieve a lower interest rate as even though you'll be paying a lower interest rate per year, you'll be paying the loan back for longer and thus increasing the total amount of interest you pay. Also, if you secure a long loan term and want to pay it off early, it is likely that the lender will charge you for the interest he is missing out on. Make sure you check the particulars of the loan term with your lender.